Mid-Year Report: New Home Sales in Alabama Up 8.7%; Housing Starts Up 4.3%

Alabama new home salesduring the 2nd quarter of 2012 were 6.6 percent higher than the same period in 2011. Year-to-date (YTD) through June, sales are up 8.7 percent from 2011. June residential sales in Alabama experienced a growth rate of 6.0 percent when compared to June 2011.

June new home sales in Alabama's five metro markets, representing approximately seventy percent of all statewide transactions, experienced a 16.6 percent increase from the prior month.

Sixty percent of metro areas have experienced YTD increase in new home sales compared to 2011 with Montgomery (up 46%) posting the best results followed by Birmingham (25%) and Tuscaloosa (17%). YTD new home sales have declined in Mobile (down 23%) and Huntsville (down 5%).

Demand: In June, Alabama new home sales outperformed the US market which reflected an increase of 15.1 percent from June 2011 but an 8.4 percent decline from the prior month, according to the US Census Bureau & HUD. The release also reported that the results from the South region were up 6.5 percent from June 2011 but 8.6 percent down last month.

Supply: Statewide new construction inventory has declined by approximately 13 percent from last June which is consistent with US trend (down 24%). All metro markets have experienced reductions in inventory since June 2011. Birmingham (down 20%), Mobile (-10%) and Tuscaloosa (-9%) led the state in inventory reduction.

Alabama's metro markets in June reflect 4.1 months of new home supply, a significant improvement from 4.9 months of supply in June 2011 and down from 4.9 months from May 2012. According to the US Census Bureau, the US inventory of new homes for sale decreased to 144,000 homes or 4.9 months' supply, also a big improvement from 6.6 months of supply in June 2011 (down 25%).

Pricing: Alabama's metro market's median new home sales price in June was $226,766, an increase of 8.2 percent from last month and an increase of 13.9% when compared to June 2011.

New Home Pipeline (see graph): June statewide housing starts increased by .6 percent from the prior month and increased 7.8 percent from June 2011. YTD housing starts are up 4.3%. June statewide building permits were down 6.2 percent from the prior month and 2.2 percent from May 2011. YTD building permits are up 6.2%.

Residential Construction Employment: According to the Alabama Dept. of Industrial Relations, statewide residential construction employment was up .2 percent (100 jobs) to 60,800 from last month but remains down 8.9 percent or 6,000 workers from June.

Local Results: 8 out of the 27 home builder associations (30% - down from 37% in prior month) reported gains in building permits from the prior month (May 2012) while 10 associations (37% - down from 70%) reported gains in housing starts.

Favorable weather conditions have positively impacted new home construction in recent months. The new home industry is expected to gradually improve in 2012 and beyond as the general consensus is that the worst market conditions are in the rearview mirror. One caveat, weak overall US job creation and uncertainty resulting from Europe financial crisis and upcoming general election (future US fiscal path) continue to give industry watchers reason for significant concern.